Breach of contract and theft of trade secrets

Federal District Court Opinions

DATA RACE, INC. v. LUCENT TECHNOLOGIES, INC., (W.D.Tex.
1999) 73 F. Supp.2d 698 DATA RACE, INC., Plaintiff, v.
LUCENT TECHNOLOGIES, INC., Defendant. No. CIV.A.
SA98CA746PMA United States District Court, W.D. Texas, San
Antonio Division October 29, 1999 West Page 699

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John N. McCamish, Jr., McCamish & Socks, P.C., San Antonio,
TX, Floyd R. Nation. Arnold White & Durkee, Houston, TX,
David D. Bahler, Arnold, White & Durkee, Austin, TX, Harold
L. “Buddy” Socks, McCamish & Socks, P.C., San Antonio, TX,
for Plaintiff.

Robert W. Wachsmuth, The Kleberg Law Firm. San Antonio, TX,
Hubert W. Green, Jr., The Kleberg Law Firm, San Antonio,
TX, Paul C. Saunders, Cravath, Swaine & Moore, New York,
NY, Julie A. North, Cravath, Swaine & Moore, New York, NY,
Christopher Steskal, Karin A. Guiduli, Cravath, Swaine &
Moore, New York, NY, for Defendants. West Page 703

FINDINGS OF FACT AND CONCLUSIONS OF LAW AND MEMORANDUM
OPINION

MATHY, United States Magistrate Judge

Pursuant to the consent of the parties filed on November 6,
1998,[fn1] in compliance with Fed.R.Civ.P. 52, 56 and 65,
the Court enters the following Findings of Fact and
Conclusions of Law and Memorandum Opinion in connection
with the combined evidentiary hearing on plaintiff’s motion
for issuance of a preliminary injunction and claims
construction hearing, which began on August 30, 1999 and
concluded on September 17, 1999. As discussed below, this
Order also decides other issues raised by defendant’s
motion for summary judgment and plaintiff’s motion for
partial summary judgment.

I. JURISDICTION

The Court has jurisdiction over plaintiffs claims that
defendant has infringed its patent, 28 U.S.C. §
1331, 1338(a) and 2201(a), and over defendant’s
counterclaim for declaratory judgment that plaintiffs
patent is invalid and not infringed by defendant. 28 U.S.C.
§ 1338(a), 2201 and 2202. Venue is proper under 28
U.S.C. § 1400(b).

II. PROCEDURAL HISTORY

This case concerns claims of alleged patent infringement.
Data Race, Inc. (“plaintiff” or “Data Race”) filed its
original complaint and motion for issuance of a preliminary
injunction on August 18, 1998 alleging that defendant
Lucent Technologies, Inc. (“defendant” or “Lucent”) has
infringed one of its patents, United States Patent No.
5,764,639 (“`639 patent”); misappropriated confidential and
proprietary information in breach of contract and theft of
trade secrets; violated the Sherman Antitrust Act; and
engaged in unfair competition.[fn2] Among other
allegations, Data Race averred that Lucent Technologies’
operation of Lucent’s Internet Telephony Server for
Enterprises (“ITS-E”) with Lucent’s Virtual Telephone
application infringed the ‘639 patent used in plaintiffs
competing product marketed under the name “Be There!”

On September 17, 1998 the Court set a September 25, 1998
hearing to address plaintiffs request for expedited
discovery and defendant’s request to stay the case pending
arbitration. The September 17 Order also called upon
plaintiff to file an advisory on or before September 22,
1999 to inform the Court whether it wished to proceed with
an evidentiary hearing on its motion for preliminary
injunction on September 25.[fn3] On September 21, 1998
defendant filed an advisory informing the Court that
defendant had decided not to offer Virtual Telephone for
general distribution and that no release date had been
selected.[fn4] On September 22, 1998 plaintiff filed an
advisory in which it withdrew its request for a preliminary
injunction.[fn5] Therefore, the September 25, 1998 hearing
did not address the issuance of a preliminary injunction.

Following the September 25 hearing, on October 2, 1998, the
undersigned issued a report to the District Court
recommending, inter alia, that plaintiffs motion for
expedited discovery and defendant’s motion for stay pending
arbitration each be denied.[fn6] With specific respect to
plaintiffs motion for preliminary injunction and in
reference to plaintiffs advisories,[fn7] the undersigned
recommended that the portion of the Complaint that had been
construed as a motion for preliminary injunction be denied
without prejudice to plaintiff “filing a separate motion
for a preliminary injunction with a request for an
evidentiary West Page 704 hearing after it has obtained
the preliminary discovery which it believes it is required
to support its application.”[fn8] On October 27, 1998 the
District Court accepted that report.[fn9] That same day,
plaintiffs first amended complaint, which asserted only
claims of patent infringement, the “live” complaint at
issue in this case, was filed.[fn10] Lucent had answered
plaintiffs first amended complaint on October 19, 1998
asserting the defenses of non-infringement, invalidity (for
anticipation and obviousness) and unenforceability (for
inequitable conduct) and asserting a counterclaim for
declaratory judgment of non-infringement and invalidity of
the ‘639 patent.

On August 3, 1999 plaintiff filed its renewed motion for
issuance of a preliminary injunction.[fn11] In sum,
plaintiff argues that after plaintiffs’ first request for
preliminary injunction, Lucent shifted the Virtual
Telephone application from the original hardware platform
(the ITS-E server) to a different platform, the MultiMedia
Communications Exchange (“MMCX”) server, release 3.0, and
decided to offer the Virtual Telephone for sale in
conjunction with the new MMCX release 3.0 server. Plaintiff
argues that the Virtual Telephone continues to infringe the
‘639 patent because the elements of the invention claimed in
the ‘639 patent are included in the MMCX. release 3.0, with
the Virtual Telephone application. Plaintiff requests a
preliminary injunction to prevent Lucent from “making,
using, selling or offering to sell its . . . [MMCX] . . .
server, release 3.0, which includes a Virtual Telephone
application (“Virtual Telephone”).”[fn12] Plaintiff asserts
infringement of claims 1, 14 and 39 of the ‘639
patent.[fn13]

Lucent argues, in sum, that Data Race’s request for a
preliminary injunction should be denied for five reasons.
First, Lucent argues that Virtual Telephone does not
infringe the ‘639 patent. Second, Lucent argues that even
if there is infringement, the MMCX server, including the
concept and technology for the Virtual Telephone, was
invented prior to the date plaintiff filed its patent
application and, therefore, the ‘639 patent is invalid.
Third, Lucent argues that the ‘639 patent is invalid under
35 U.S.C. § 102(a) and (e) because it was anticipated
by the prior art and under 35 U.S.C. § 103 because,
in light of the prior art, it would have been obvious to a
person of ordinary skill in the art at the time of the
claimed invention. Fourth, Lucent argues that the ‘639
patent is unenforceable due to plaintiffs inequitable
conduct before the United States Patent and Trademark
Office (“PTO”). Fifth, Lucent argues that plaintiff has
failed to demonstrate irreparable harm because the balm
plaintiff alleges is compensable in money.

Between August 30, 1999 and September 17, 1999, the Court
held an evidentiary hearing on plaintiffs’ motion for
preliminary injunction.[fn14] Prior to the hearing, the
West Page 705 parties filed Markman briefs,[fn15] proposed
claim construction statements,[fn16] a joint proposed claim
construction statement,[fn17] and briefing on the requested
preliminary injunction.[fn18] Prior to the hearing, the
parties stipulated to the admission of most of the
evidence. At the hearing, three witnesses testified for
plaintiff: Dr. W.B. Barker and Kenneth L. Witt, two of the
three inventors of the ‘639 patent,[fn19] and plaintiffs
expert witness, Scott O. Bradner. Defendant called four
witnesses: Bryan S. Katz, Alan J. Literati, Richard S.
Vidil and defendant’s expert, Dr. Stephen Weiss. At the
close of defendant’s case, plaintiff re-called Mr. Witt as
a rebuttal witness.[fn20]

At the beginning of the hearing, Lucent made an oral motion
pursuant to Fed.R.Civ.P. 65(a)(2) to consolidate the
preliminary injunction hearing with the trial on the
merits. Data Race opposed this motion on the ground that it
had a right to a jury trial. The Court denied the motion to
consolidate, ruling that Data Race had a right to jury trial
if it could establish compensatory damages for its claim of
infringement.[fn21] Two motions were carried with the case:
defendant’s oral motion for partial findings under Rule
52(c), Fed.R.Civ.P., made at the close of plaintiffs
case-in-chief[fn22] and defendant’s motion to strike the
rebuttal testimony of Mr. Witt.[fn23] West Page 706 At
the close of the evidence the Court extended the time for
the parties to file motions for summary judgment until
October 1, 1999; ordered the parties to file proposed
findings of fact and conclusions of law on or before
October 4, 1999; and called for responses to any motions
for summary judgment to be filed on or before October 8,
1999.

The Court has now reviewed the parties’ proposed findings
of fact and conclusions of law,[fn24] Lucent’s motion for
summary judgment,[fn25] Data Race’s motion for partial
summary judgment[fn26] and the parties’ responses
thereto.[fn27] For the reasons stated in this Order, the
Court concludes that Data Race has not established a claim
for damages and, therefore, summary judgment in favor of
Lucent on damages is appropriate. Accordingly, because Data
Race is not entitled to a jury trial on its remaining claim
for injunctive relief, the Court may decide the remaining
issues on the merits. The Court concludes that Data Race
has not met its burden of proof that it is entitled to
issuance t)f a preliminary injunction. Although, in the
preliminary injunction context, Data Race has met its
burden of showing a reasonable likelihood that Lucent
cannot produce clear and convincing evidence that the patent
is invalid, Data Race has not established reasonable
likelihood that the MMCX, release 3.0 with Virtual
Telephone infringes the ‘639 patent. The Court further
concludes that there is no genuine issue of material fact
regarding the issue of infringement or, in the alternative,
that judgment on the issue of infringement should be
entered in favor of defendant. The Court also concludes
that Lucent has not presented sufficient evidence to render
as “plainly evident” the invalidity of the patent in suit.

III. ISSUES

1. Has plaintiff satisfied its burden of proving
entitlement to a preliminary injunction to prevent
defendant from making. using, selling and offering to sell
its MMCX server, release 3.0, which includes a Virtual
Telephone application during the pendency of this lawsuit?

2. Is there a genuine issue of material fact with respect
to plaintiffs request for damages on its claim of
infringement?

3. Is there a genuine issue of material fact with respect
to the issue of infringement or, alternatively, may
judgment be entered on the issue of infringement?

4. Are Lucent’s defenses of invalidity and unenforceability
“plainly evident”? West Page 707

IV. STANDARDS

A. Preliminary Injunction Standards

District courts are authorized by statute to issue
preliminary and permanent injunctions in patent.
cases.[fn28] Whether or not to grant a preliminary
injunction against patent infringement involves substantive
matters unique to patent law and, therefore, the law of the
Court of Appeals for the Federal Circuit controls.[fn29] As
to purely procedural aspects of injunctions, such as
whether there has been compliance with Fed.R.Civ.P. 52(a)
and 65, the law of the regional circuit, that is, the Fifth
Circuit Court of Appeals, controls.[fn30]

According to the Federal Circuit, The test for entitlement
to a preliminary injunction has four parts. A preliminary
injunction to stop allegedly infringing acts may be granted
only if the patentee demonstrates: “(1) a reasonable
likelihood of success on the merits, (2) an irreparable
harm, (3) the balance of hardships tipping in the
patentee’s favor, and (4) a tolerable effect on the public
interest.”[fn31] A preliminary injunction has been rightly
described as a “drastic and extraordinary remedy” not to be
routinely granted.[fn32] Equity requires that “the district
court must weigh and measure each factor against the other
factors and against the form and magnitude of the relief
requested.”[fn33] No factor or circumstance may be ignored.
If the preliminary injunction is granted, the weakness of
the showing regarding one factor may be overborne by the
strength of the showing on the others. If a preliminary
injunction is denied, the absence of an adequate showing on
any one factor can be sufficient to justify the denial,
depending on the weight assigned the other factors.[fn34]
The Federal Circuit has stated that it is preferable that
all factors be considered, but the first two
factors-like-lihood of success on the merits and
irreparable harm — are central and “a movant cannot
be granted a preliminary injunction without . . .
carr[ying] its burden on both factors.”[fn35]

The matter of preliminary injunctive relief is committed to
the sound discretion of the trial court.[fn36] The trial
court’s decision will be overturned only upon a showing
that it made “a clear error of judgment in weighing
relevant factors or exercised its discretion based upon an
error of law or clearly erroneous factual findings.”[fn37]
Findings of fact are reviewed under the clearly erroneous
standard and conclusions of law are reviewed de novo.[fn38]

In patent cases, the Court’s analysis of movant’s
likelihood of success on the merits focuses on the
infringement and West Page 708 validity of the asserted
patent claims.[fn39] An infringement analysis consists of
two steps. First, the court addresses, as a matter of law,
the correct scope of the claims. Second, the court compares
the properly construed claims to the accused device in
order to determine, as a matter of fact, whether all claim
limitations are present, either literally or by a
substantial equivalent, in the accused device.[fn40]

B. Claim Construction

1. Timing

Claim construction is a matter for the Court.[fn41] The
Markman decision established a court’s obligation to
instruct the jury on the meaning of words used in a
claim.[fn42] It is not necessary for a court to construe
definitively the patent claims when ruling on a motion for
preliminary injunction.[fn43] Nevertheless, in this case.
given the timing of the filing of the motion for
preliminary in junction in the context of the filing of
claim construction statements and briefs, and given
plaintiffs representations that there are no non-damage
related issues which were not presented in evidence at the
preliminary injunction hearing,[fn44] the Court concludes
it is appropriate at this time to construe the disputed
terms in claims 1, 14 and 39 of the ‘639 patent even apart
from its disposition of summary judgment issues.[fn45]
Indeed, the parties’ arguments to the Court anticipate that
the Court will construe claims 1, 14 and 39 at this time.

2. Priority of Evidence

Claims are construed from the vantage point of a person of
ordinary skill in the art at the time of the
invention.[fn46] In construing a claim, a court looks first
to the intrinsic evidence of record, namely, the language
of the claim, the specification. and the prosecution
history.[fn47] The claim language itself defines the scope
of the claim and “a construing court does not accord the
specification, prosecution history, and other relevant
evidence the same weight as the claims themselves, but
consults these sources to give the necessary context to the
claim language.”[fn48] In its discretion, the court may also
look at extrinsic evidence: testimony from inventors and
expert witnesses, dictionary definitions West Page 709
and treatises.[fn49] Although extrinsic evidence may be
considered if needed to assist the court in understanding
the technology at issue or in determining the meaning or
scope of technical terms in a claim,[fn50] reliance on any
extrinsic evidence is improper where the public record,
that is, the claims, specification, and file history,
unambiguously defines the scope of the claims.[fn51]
Competitors have the right to look at the public record and
attempt to “invent or design around” a claimed
invention.[fn52] That right would be hollow if expert
testimony can alter that record. Expert testimony, or other
extrinsic evidence, including prior art, will be used only
to aid the Court in understanding the claim, not to broaden
the scope of the patent or to contradict the claim
language, the specification or the prosecution
history.[fn53]

It is well established that “claims must be interpreted and
given the same meaning for purposes of both validity and
infringement analyses.”[fn54] Markman has led some courts
to decline to consider prior art in interpreting claim
language, reserving all such issues for the separate
inquiry into validity.[fn55]

In this case, the Court looks to intrinsic evidence
— the patent itself, including the claims, the
specification and prosecution history — in defining
the disputed claims. The claims define the scope of the
invention.[fn56] The Court has accorded the disputed terms
their plain and customary meaning in the relevant
art,[fn57] unless it is clear from the specification and
the prosecution history that the inventors accords the term
an alternate meaning.[fn58] West Page 710 A patentee may
be his own lexicographer if the special definition of the
term is clearly stated in the specification or prosecution
history or when the specification defines a term by
implication.[fn59] Thus, the Court has reviewed the
specification, which may act as a “dictionary,” either
expressly or by implication. The portions of the
prosecution history in evidence also been reviewed and
considered.[fn60] The Court gives only limited
consideration of “extrinsic” evidence, as noted expressly
herein, such as dictionaries or expert witness testimony,
to explain the terms of art or to address the parties’
contentions about the claims, but not to “vary or
contradict the claim language” or to “contradict the import
of other parts of the specification.”[fn61]

There is presumed to be “a difference in meaning and scope
when different words or phrases are used in separate
claims.”[fn62] There is a presumption against construing
claims as being so similar as to “make a claim
superfluous.”[fn63]

Although the Federal Circuit has held that claims should be
read in view of the specification,[fn64] the Court
repeatedly has cautioned against limiting the scope of a
claim to the preferred embodiment or specific examples
disclosed in the specification.[fn65] Claims and
interpretation of the prosecution history is undertaken to
sustain the validity of the claims, if possible, short of
actually redrafting the claims.[fn66] “The construction
that stays true to the claim language and most naturally
aligns with the patent’s description of the invention will
be, in the end, the correct construction.”[fn67] The figures
in the ‘639 patent may be considered “in the same manner
and with the same limitations as the specification.”[fn68]

C. Summary Judgment Standards

The applicable standard in deciding a motion for summary
judgment is set forth in Fed.R.Civ.P. 56, which provides in
pertinent part as follows:

the judgment sought shall be rendered forthwith if the
pleadings, depositions answers to interrogatories, and
admissions on file, together with the affidavits, if any,
show that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as
a matter of law.[fn69]

Mere allegations of a factual dispute between the parties
will not defeat an otherwise proper motion for summary
judgment. Rule 56 requires that there be no genuine issue
of material fact.[fn70] In an employment discrimination
case, the Court focuses on whether a genuine issue of
material fact exists as to whether the defendant
intentionally discriminated against the plaintiff.[fn71] A
fact is material if it West Page 711 might affect the
outcome of the lawsuit under the governing law.[fn72] A
dispute about a material fact is genuine if the evidence is
such that a reasonable jury could return a verdict for the
nonmoving party.[fn73] Therefore, summary judgment is
proper if, under governing laws, there is only one
reasonable conclusion as to the verdict; if reasonable
finders of fact could resolve a factual issue in favor of
either party, summary judgment should not be granted.[fn74]

The movant on a summary judgment motion, in this case bears
the initial burden of providing the court with a legal
basis for its motion and identifying those portions of the
record which it alleges demonstrate the absence of a
genuine issue of material fact.[fn75] The burden then
shifts to the party opposing the motion to present
affirmative evidence in order to defeat a properly
supported motion for summary judgment.[fn76] All evidence
and inferences drawn from that evidence must be viewed in
the light most favorable to the party resisting the motion
for summary judgment.[fn77] Thus, summary judgment motions
permit the Court to resolve lawsuits without the necessity
of trials if there is no genuine dispute as to any material
facts and the moving party is entitled to judgment as a
matter of law.[fn78]

When affidavits are used to support or oppose a motion for
summary judgment they “shall be made on personal knowledge,
shall set forth facts as would be admissible in evidence,
and shall show affirmatively that the affiant is competent
to testify to the matters stated therein.”[fn79] Affidavits
that are not based on personal knowledge or that are based
merely on information and belief do not satisfy the
requirements of Rule 56(e), and those portions of an
affidavit that do not comply with Rule 56(e) are not
entitled to any weight and cannot be considered in deciding
a motion for summary judgment.[fn80] Neither shall
conclusory affidavits suffice to create or negate a genuine
issue of fact.[fn81]

V. ANALYSIS

With the foregoing principles on claim construction in
mind, the Court makes the following background findings
regarding the ‘639 patent and Lucent’s accused device, and,
thereafter, the disputed claim elements in claims 1, 14 and
39 of the ‘639 patent.

A. The Claimed Invention: The ‘639 Patent

Data Race is the holder of U.S. Patent No. 5,764,639 (the
“`639 patent”), entitled, “System and Method for Providing
a Remote User With a Virtual Presence To An Office.” The
‘639 patent issued on June 9, 1998 based upon an
application filed on November 15, 1995 and is generally
directed to a system and method for enabling a West Page
712 remote user to maintain a “virtual presence” at a
corporate office.

Data Race claims infringement of three claims of the ‘639
patent: claims 1, 14 and 39. The following is a summary of
the key elements of the claimed invention described in
those claims. The commercial embodiment of the claimed
invention is a product called “Be There!”

Claim 1

Claim 1 is an apparatus claim that describes a system that
provides a “remote user,” which included a telecommuter,
road warrior, branch office or remote small office with a
“virtual presence’ at the corporate office.[fn82] According
to the patent, “virtual presence” means a remote user s
ability to send and receive voice or data communications to
and from the corporate office just as if the user were
physically located in the corporate office. Thus, the
remote user’s telephone mirrors the telephone the user has
at the corporate office and provides the remote user with
the same functions as the office private branch exchange
(“PBX”), such as conference call, call forwarding and call
transfer. The remote user also can access data applications
on the office local area network (“LAN”) just as if the
remote user were located at the corporate office.[fn83]

The system described in claim 1 includes a user
communications device that is “adapted for coupling to a
transmission media” which is defined to include the PBX,
asynchronous transfer mode (“ATM”) networks, T1 lines and
other types of transmission media, to include a normal
telephone line or an Integrated Services Digital Network
(“ISDN” line (used for digital data and voice
communications).[fn84]

The system described in claim 1 also includes a “virtual
presence server” (“VPS”) “located at the corporate office”
with “one or more connections for coupling to a telephony
server and a local area network” and “one or more
connections for coupling to transmission media.”[fn85] The
VPS is installed in the corporate office and connected to
the “transmission media” (such as the PSTN), the office
telephony server (such as the PBX) and the office
LAN.[fn86] The VPS allows a remote user to establish a
“virtual presence” when the remote user dials into the VPS
and establishes a connection over the “transmission media”
with the telephony server and the LAN.[fn87]

Claim 1 provides that the communications device (such as a
personal computer) of the remote user, after connecting to
the VPS through “transmission media,” transmits
“identification information” through the “transmission
media” to the VPS.[fn88]

The VPS routes communications received by either the LAN or
the telephony server “which are intended for the remote
user of said user communication device” to the remote user
over the “transmission media.”[fn89]

Claim 14

Claim 14 is a dependent claim of claim 1 and, therefore,
incorporates the elements of claim 1 and adds some
additional elements.

Under claim 14, the “user communications device transmits
communications including address information of said user
communications device where said user communications device
can be contacted.”[fn90] The address information is
typically the telephone number of the remote user.[fn91]
Under claim 14, the VPS uses the West Page 713 “address
information” to “route” communications from the PBX or the
LAN to the remote user over the “transmission media.”[fn92]

Claim 39

Claim 39 is a method claim. Claim 39 provides a method for
providing a “virtual presence at a corporate office,
wherein the corporate office includes a telephony server
and a local area network, wherein the corporate office
further includes a[VPS] which routes communications between
the corporate office and the user communications
device.”[fn93]

Claim 39 states that the “user communications device
connect[s] to the [VPS] at the corporate office.”[fn94]
Claim 39 also states that the “user communications device
connect[s] to the corporate office [LAN]”, that the “user
communications device operat[es] as an extension of the
telephony server in the corporate office” and that “the
[VPS] automatically rout[es] . . . communications from said
corporate office to said user communications device.”[fn95]

B. The Accused Device; Lucent’s Virtual Telephone

Lucent’s Virtual Telephone provides customers with the
ability to use their computer as a telephone from a remote
location. The Virtual Telephone application is a voice-only
product. To access data applications from a remote
location, the remote user must bring up a separate
application on the computer screen. A premise of Virtual
Telephone is that the remote worker will use other, readily
available technology to access the office LAN and, thus,
the Virtual Telephone user will be able to access data
stored on the office computer or send e-mail at the same
time as speaking on the telephone. The Virtual Telephone
remote user must separately log into the LAN to access the
LAN’s servers and their associated applications. The
Virtual Telephone remote user is able to log into an e-mail
server and send and receive e-mails without running the
Virtual telephone application.[fn96]

If the remote user desires to run the Virtual Telephone
application after logging into the LAN, the remote worker
must separately log into the MMCX server.[fn97] The MMCX
server is connected to the office LAN and the office
PBX.[fn98] There are no other connections. The MMCX is not
connected to the transmission media, as that term is defined
in the ‘639 patent.[fn99]

Virtual Telephone uses “voice over internet protocol (IP)”
which means that it turns signals into small digital
packets or data packets that are placed on the office LAN
and are treated like other data carried on the LAN.[fn100]
Those packets are then routed by devices on the LAN to a
remote user who has signed on to the Virtual Telephone and
has signed on to the office LAN from a remote
location.[fn101]

To use Virtual Telephone from a remote location, a remote
user must first establish a connection to the LAN by
running standard remote access software to log into the
office remote access server (“RAS”).[fn102] After a
connection is established between the remote user and the
RAS, the RAS assigns the remote user’s device a temporary
Internet Protocol (or “IP”) address that is used by the RAS
to route communications West Page 714 to or from the
remote user over the LAN.[fn103]

In the Virtual Telephone application, the PBX is manually
administered to forward calls from the remote user’s office
extension to the MMCX server over a trunk connection after
a specified number of unanswered rings.[fn104] This is
sometimes referred to as a “coverage path.” After a Virtual
Telephone remote user logs onto the MMCX server, a call that
is intended for the remote user’s office extension is
transferred to the MMCX server if the office extension is
not answered.[fn105] If the remote user is logged into the
MMCX server, the MMCX server then “packetizes” the call,
.i.e., it breaks the call into small packets of data and
places the IP address received earlier from the RAS in front
of each packet of data.[fn106] The MMCX server then places
the data packets onto the LAN.[fn107] At that point, the
call is a stream of data packets.[fn108] It bears no
resemblance to the analog signal that was originally sent
to the MMCX server by the PBX.

The MMCX server places all calls that it receives on the
LAN. After placing the call on the LAN, the MMCX server has
finished its job. In effect, the MMCX server acts as a
gateway between the PBX and the LAN by turning voice calls
received from the PBX into IP data packets that can be
handled by the LAN.[fn109] When the MMCX server places the
call on the LAN, the call looks just like any other IP
information addressed to the client, such as an e-mail. The
LAN delivers the data packets to all the servers. The RAS
then picks the data packets intended for its particular
remote user off the LAN and routes them to that remote
user.[fn110]

After the RAS sends the data packets across the
transmission line to the remote user, the software in the
remote user’s computer reassembles (or “un-packetizes”) the
data packets and turns them into an analog voice call. The
“soft phone” on the remote user s computer screen rings,
and the remote user can answer the phone by clicking on the
computer screen. The remote user can talk to the caller by
using a handset or headset connected to the
computer.[fn111]

C. Claim Construction of Disputed Terms in the ‘639 Patent

Prior to the preliminary injunction hearing the parties
submitted a joint claim construction chart which set forth
each party’s proposed construction of the terms used within
claims 1, 14 and 39 of the ‘639 patent. During the
preliminary injunction hearing, both parties presented
evidence regarding the meaning of certain disputed terms in
claims 1, 14 and 39. The Court finds that each term in
claims 1, 14 and 39 is used consistently throughout the
claims and the specification of the ‘639 patent.[fn112] The
Court accepts the parties’ definitions on the undisputed
terms as set forth in the parties joint claim construction
chart, since these stipulated constructions comply with 35
U.S.C. § 112.[fn113] The Court also accepts the
parties’ definitions on the remaining disputed terms not
discussed herein. The Court makes the following findings
with respect to the material disputed terms which are to be
construed in West Page 715 all claims as indicated herein.
These terms, as construed, are the basis for the Court’s
conclusions with respect to injunctive relief.

“remote user”

The ‘639 patent defines the term “remote user” as follows:
“the remote user may either be a telecommuter or a road
warrior, or may be a resident in a branch office, also
referred to as a remote small office” who accesses a
corporate office from a physically distant location over a
transmission media.[fn114]

The claimed invention described in claims 1, 14 and 39
provides a “remote user” with a “virtual presence” to a
corporate office. The claimed invention can be practiced
with connectivity between one or more remote users and the
corporate office.[fn115] The Court rejects plaintiffs
proposed construction of “remote user”[fn116] since it
omits the reference to a resident in a branch
office.[fn117]

“virtual presence”

The term “virtual presence” means a remote user’s ability
to send and receive voice and data communications to and
from a corporate office with the full capabilities and user
interfaces of the corporate office just as if the remote
user were physically present in the corporate office.

The term “virtual presence” is not commonly used in the
relevant art. The Court looks to) the intrinsic evidence,
from the perspective of one of ordinary skill in the
relevant art, to determine the meaning of “virtual
presence”.[fn118]

The term “virtual presence” is used in the “summary of
invention” section of the ‘639 patent:

The present invention enables the concept of virtual
presence or “telepresence” whereby a user at a remote
location has the full capabilities and user interfaces of
the corporate office just as if the user were physically
located at the corporate office. Thus the telephone of the
remote user mirrors the telephone tile user sees at the
corporate office, including substantially the same button
configurations at substantially the same locations
performing substantially the same functions.[fn119]

This language shows that “virtual presence” entails full
functionality of the office telephone and LAN from the
remote location.

The “summary of invention” states further;

According to the invention, the remote user makes
outgoing telephone calls, sends faxes, transmits data,
sends email and performs internet access as if the remote
user were physically present in the corporate office.
Likewise, incoming calls, faxes, data transmissions and
email received at the corporate office are routed to the
remote user as if the remote user were physically present
in the corporate office. Therefore, a coworker or external
party who telephones the user at the corporate office is
unaware that the user is actually not physically located
at the corporate office, but rather is at a remote
location.[fn120] West Page 716

The plain meaning of this language shows that “virtual
presence” entails transparency from the outside, that is, a
person calling the corporate office for the remote worker
would be connected to the remote user without being able to
perceive that the remote user is not in the corporate
office.

The joint claim construction chart indicates that plaintiff
originally proposed this interpretation of “virtual
presence”: “[t]he remote user transparently operates as if,
and appears to a coworker or other party to be, physically
located in the remote user s corporate office.”[fn121]
Plaintiff further highlighted the central feature of
transparency in its opening statement. when arguing that if
the office door of the remote worker were closed, the
remote worker’s colleagues at the corporate office should
not be able to tell that the remote worker was not in his
office when a call was placed to the remote worker’s office
phone.[fn122] Two of the inventors, Dr. Barker and Mr.
Witt, testified, in sum, that virtual presence allows a
remote user to appear to those interacting with him or her
to be in the office.[fn123] In the course at the
preliminary injunction hearing, however, plaintiff
contended that the claims do not require transparency or,
as characterized by plaintiff, “true virtual presence.”
Plaintiff now argues that the ‘639 patent “describes
preferred embodiments in which the virtual presence server
instructs the corporate PBX to automatically forward all
calls to the remote user” but, in these embodiments, the
caller with a display telephone would be aware that the PBX
had forwarded the call. Therefore, plaintiff argues, if
virtual presence requires transparency, a preferred
embodiment in the specification would not fall within the
scope of the claims — an interpretation, plaintiff
argues, is rarely, if ever correct.[fn124] Instead,
plaintiff argues that a “reasonable impression” of
transparency is all that is required.[fn125]

The words of the patent clearly indicate that transparency
was part of the claimed invention.[fn126] In addition, the
specification repeatedly emphasizes the importance of
transparency to the concept of virtual presence and defines
“virtual presence” or “telepresence” to include
transparency. This definition, if not dispositive, is
highly relevant.[fn127]

Transparency is not at issue with respect to data
communications.[fn128] Transparency is at issue with
respect to voice communications. Plaintiffs expert, Mr.
West Page 717 Bradner, a person with ordinary skill in the
art, agreed at the preliminary injunction hearing that,
under the words of the ‘639 patent, a person who calls the
office number of the remote user and whose call is
transferred to a remote location should not be able to
perceive that the remote worker is not in the office;
therefore, if the forwarding of the call is apparent, it
would be “incomplete virtual presence, at best” and that
“virtual presence” “probably” is not present as that term is
used in the patent.[fn129] To practice the invention, the
PBX must send calls to the remote worker in a way that
insures transparency.[fn130]

“identification information” and “address information”

The term “identification information” means specific
information from the user communication device that
identifies that specific device, its user and where the
device is located, that is stored in the VPS and that is
used by the VPS to determine if the data and voice
communications received by the LAN or telephony server,
respectively, are intended for the remote user and used by
the VPS to route such data and voice communications to the
remote user.

The term “address information” means a designation of the
identity of the user communication device sufficient to
indicate where the user communication device can be
contacted. The information is typically a telephone number.

“Identification information” must have all of the
following characteristics: (1) it must be “of said user
communications device;”[fn131] (2) it must be received by
and provided to the VPS from the user communications
device;[fn132] (3) it must be used to determine if a
communication from the LAN or PBX is intended for the
remote user;[fn133] (4) it must be used by the VPS to
“route” communications received by the LAN or PBX which are
intended for the user communications device to the remote
user communications device;[fn134] and (5) it must provide
the identity of the remote user.[fn135] In sum,
identification information identifies the remote user
communications device and how the remote user’s computer
can be contacted by the VPS.

The only example of identification information provided by
the ‘639 patent is “caller ID” information in a description
of “the preferred embodiment.”[fn136] Mr. Bradner conceded
that no other information is provided in the patent as to
what is “identification information” although the patent
allows that other types of identification information may
be received.[fn137] The specification distinguishes
“identification information” from “security data”[fn138]
West Page 718 but does not preclude the possibility that
security data could be included within identification
information.

Caller ID information may be sufficient for use as the
identifier when the PSTN is the network between the VPS and
the user communication device. But, if other networks are
present, other identifiers would be necessary.[fn139] One
with ordinary skill in the art would consider that
“identification information” used in routing data in an IP
network may include an IP address,[fn140] but, as Bradner
conceded, cannot consist only of an IP address.[fn141] An
IP address alone cannot meet the first and fifth criteria
listed above and does not meet the third and fourth
criteria with respect to voice communications.[fn142]
Moreover, the ‘689 patent expressly claims an embodiment of
the VPS that disconnects from the remote user and then
reconnects to the remote ttser when the remote user
receives a call at the office;[fn143] and IP address alone
cannot be used to call the remote user and reestablish a
connection between the remote user and the VPS.
Significantly, the PTO distinguished prior art in which the
“identification information” was an IP address, indicating
that the examiner concluded that an IP address alone was
not “identification information.”[fn144]

The term “address information” as used in claim 14 is
similar to “identification information” found in claims 1
and 39. “Address information” refers to the identifier
portion of identification information that indicates the
identity of a user communications device sufficient to
indicate where the user communications device can be
contacted. Address information received from the user
communications device is stored or placed into the memory
of the VPS. The VPS accesses or retrieves the stored
address information from its memory to route communications
received by either the LAN or the telephony server to the
remote user communications device over the transmission
media.

“routes”

The term “routes” means to choose an appropriate
destination from two or more possibilities and to direct
based on that choice.

The VPS routes by directing a voice or data communication
meant for a particular remote user over the transmission
media to the appropriate remote user communications device.
Communications are “routed from either the telephony server
or the [LAN] to said user communications device” by means
of the “transmission media.” Routing implies a choice
between alternative destinations. Although plaintiffs
proposed construction requires “routing” to be based on
“identification information,” and although a person with
ordinary skill in the art would understand how an IP
address is used in data routing, the patent does not specify
a single method of routing.[fn145]

The term “automatically routes” or “automatically routing”
as used in claim 39 means that routing, as defined above,
is accomplished without the further intervention or
instruction to the user communication device or by the
remote user.

“virtual presence server (ups)”

The term “virtual presence server” means a server located
at the corporate office that executes software that enables
the remote user to maintain a virtual presence at the
corporate office by dialing West Page 719 the VPS and
establishing a direct connection.

The “summary of the invention” section of the ‘639 patent
states: “The [VPS] executes software that enables the
remote user to maintain a virtual presence at the corporate
office” by dialing the VPS and establishing a
connection.[fn146] Access from the remote user to the VPS
is through the PSTN and not the LAN. After the remote user
connects to the VPS through the PSTN, then the remote user
connects to the LAN through the VPS. Access from the remote
user to the telephony server is not through the LAN or RAS
(remote access server) but directly through the VPS.

Plaintiff’s proposes a definition of VPS as a node on the
LAN. With respect to data communications, the VPS may be a
node on the LAN even though figure two to the patent
suggests that the VPS is not connected directly to a LAN
but connected to a LAN through a RAS. With respect to voice
communications, a remote worker receives a call at a remote
location when the call is sent from the PBX through the VPS.
The LAN is not involved at all in the delivery of the call
to the remote worker and, so far as voice is concerned, the
VPS is not ever a node on the LAN. Accordingly, plaintiffs
definition of VPS to mean an node on a LAN is not accepted.

Plaintiff also suggests that the VPS must be capable of
supporting more than one user at the same time. The
definition of “remote user” makes it clear that a system
that covers only one user is covered by the ‘639 patent.
The two testifying experts, Bradner and Weiss, people with
ordinary skill in the relevant art, each agreed that a
server can serve only one user and that the claimed
invention could be practices by a system that supports only
one remote user.[fn147]

“virtual presence server (vps) communications device”[fn148]

A virtual presence server communications device is a modem,
ISDN adapter or similar device attached to the VPS that
connects to the VPS through the transmission media to allow
the remote user to dial up the VPS and establish a
connection with the VPS through the connection media in
order to transmit and receive communications.

coupling” or “coupled”

The term “coupling” or “coupled” refers to the direct
connection of two or more circuits or systems in such a way
that power or signal information may be transferred from
one to the other.

Lucent proposes that “coupling” or “coupled” requires a
direct connection.[fn149] Plaintiff argues that this
construction is contrary to a recent Federal Circuit case
in which “coupled” was not limited to a mechanical or
physical coupling.[fn150] Rather, plaintiff argues that
coupling merely requires an association such that
information may be exchanged.[fn151] Plaintiff further
argues that if Lucent’s definition were accepted, the
remote user could never couple” to the VPS because of the
numerous intermediate hops within the PSTN.

Although the ‘639 patent discusses coupl[ing] through a
communication mechanism or channel”[fn152] which,
arguably, West Page 720 suggests intermediate connections
or “hops,” the patent also discusses the VPS having
“connections” that are adapted for “coupling” to a
transmission media, the telephony server and the LAN and the
patent refers to the user communications device as being
adapted for “coupling” to the transmission media.[fn153]
These “couplings” imply direct connections between the
elements, without unnecessary intervening connections
between the elements, as illustrated by figure 2 of the
patent,[fn154] but do not exclude intermediate “hops” within
an element, for example, within the PSTN. The direct
connections also do not exclude the logical connections
proposed by plaintiff.[fn155] This construction is not
inconsistent with the teaching of Johnson Worldwide
Associates, Inc.

“one or more connections for coupling to transmission media”

The term “one or more connections for coupling to
transmission media” means at least one point of connection
to a transmission media such as the PSTN that is different
from the “one or more connections for coupling to a
telephony server and a local area network.”

Claim 1 of the ‘639 patent describes three connections: (1)
a connection from the user communications device at the
remote site to the VPS at the corporate office through the
transmission media (e.g., PSTN); (2) a connection from the
VPS to the telephony server (e.g., PBX); and (3) a
connection from the VPS to the LAN.[fn156] Claim 14, which
is dependent on claim 1, necessarily requires the same
three connections. Claim 39 describes the first connection.

Plaintiff argues that even though the three separate
connections are shown in the embodiments to the ‘639
patent, claims 1 and 14 uses only the phrase “one or more
connections for coupling” and that three distinct
connections are not required.[fn157] Plaintiff urges that
the specific phrase “one or more connections for coupling”
means only “at least one point of connection for a data
communications path.”[fn158] The Court cannot agree. The
claims themselves require connections and the claims
describe distinct connections. Claim 1 requires that the
remote user dial up, using the transmission media (e.g.,
PSTN), the “virtual presence server communication device”
(e.g., one or more modems or one or more ISDNs) to
establish a connection with the VPS.[fn159] The VPS is
separately connected to the LAN and separately connected to
the PBX.[fn160] The connections are most significant to the
‘639 patent in part because the examiner distinguished
prior art based on the nature of the connections.[fn161]

D. Plaintiff Has Not Met Its Burden of Showing Entitlement
to a Preliminary Injunction

Plaintiffs amended complaint and motion for injunctive
relief asserts one claim: patent infringement. This claim
will be West Page 721 examined in the context of
plaintiffs burden of proof in seeking a preliminary
injunction.

1. Reasonable Likelihood of Success on the Merits

To establish a likelihood of success on the merits, a
plaintiff seeking a preliminary injunction in a patent
infringement suit must show that it likely will be able to
prove infringement and that it likely will be able to
overcome any challenge to the validity or enforceability of
its patent.[fn162] In this case, the burden is always on
the Data Race to demonstrate entitlement to preliminary
injunctive relief, but such entitlement is determined in
the context of the burdens that would inhere at a trial on
the merits. Therefore, Lucent, the patent challenger,
retains the burden of establishing invalidity and Data Race
retains the burden of showing a reasonable likelihood that
Lucent cannot produce clear and convincing evidence that
the patent is invalid and, therefore, that the attack on
the validity of the patent will fail.[fn163]

Title 35, United States Code, section 271 makes liable
anyone who (a) “without authority makes, uses, offers to
sell or sells any patented invention;” (b) “actively
induces infringement of a patent”; or (c) “offers to sell
or sells . . . a component of a patented [invention]
knowing the same to be especially made or especially adapted
for use in an infringement of such patent. . . .” As noted,
“[a]n infringement analysis entails two steps: (1) the
claims must be construed; and (2) the properly construed
claims must be compared to the allegedly infringing
device.[fn164] At the preliminary injunction stage, Data
Race must show reasonable likelihood of succeeding on its
claim that Lucent is infringing its patent. At trial, as a
patentee, Data Race bears the burden of proving
infringement by a preponderance of the evidence.[fn165] “To
establish literal infringement, every limitation set forth
in a claim must be found in an accused product,
exactly.”[fn166] To establish infringement under the
doctrine of equivalents, every limitation of the asserted
claim or its equivalent must be found in the accused product
or process and the “equivalent” differs from the claimed
invention only insubstantially.[fn167]

The presumption of validity of a patent, being procedural
and not substantive, does not alone create a presumption of
irreparable harm.[fn168] Rather, the presumption of
validity acts as a procedural device to place the burden of
going forward with evidence and the ultimate burden of
persuasion of invalidity on the alleged infringer. It does
not, in this case, relieve Data Race from the carrying the
normal burden of demonstrating it likely will succeed on
all disputed liability issues at trial.

For the reasons discussed further below, the Court
concludes that Data Race has not established a reasonable
likelihood of success on the merits. Although, as discussed
further below, the Court finds that Data Race has shown a
reasonable likelihood that Lucent will not show that the
patent is invalid,[fn169] the Court also finds West Page
722 that Data Race has not established a reasonable
likelihood that Virtual Telephone infringes the ‘639
patent. Based on the findings herein, the evidence shows
that: Virtual Telephone does not infringe any claim of the
‘639 patent because: (1) Virtual Telephone does not provide
“virtual presence” as required by claims 1, 14 and 39; (2)
Virtual Telephone does not have the connections required by
claims 1, 14 and 39; (3) Virtual Telephone performs no
“routing” as required by claims 1, 14 and 39; and (4)
Virtual Telephone does not use “identification information”
as required by claims 1, 14 and 39. Accordingly, the Court
concludes that Data Race has not carried its burden of
showing reasonable likelihood of success on the merits of
its claim for infringement.

Irreparable Harm

Because Data Race has not made a clear showing that the
‘639 patent was infringed, there is no presumption of
irreparable harm.[fn170] Moreover, even if Data Race had
established reasonable likelihood of success on the merits
(or to have prevailed on the merits of its infringement
claim, as discussed further below), Data Race has not
adequately proved irreparable harm that entitles it to
injunctive relief.[fn171] As a general rule, a preliminary
injunction will be refused when the accused infringer is
solvent and money will adequately compensate.[fn172] There
is no presumption that money damages will be
inadequate.[fn173] There is no evidence that Lucent is not
solvent.

The evidence shows that Lucent has never sold Virtual
Telephone or offered it for sale. The four customers who
are “beta” testing a version of Virtual Telephone have not
purchased Virtual Telephone and cannot purchase it until
Lucent makes each an offer to sell.[fn174] Plaintiff relies
on a portion of Mr. Katz’s deposition in which he stated,
and then modified, his opinion that the MMCX with the
Virtual telephone application had been offered for sale to
the beta test customers.[fn175] Katz’s unsupported
subjective belief cannot take precedence over the written
beta test contracts which expressly state that Lucent has
not and may not ever offer the Virtual Telephone
application for sale.[fn176] Unlike the price quotation
letters considered by the Federal Circuit in 3D Systems,
Inc. v. Aarotech Laboratories, Inc.,[fn177] the beta test
contract in evidence does not contain a fixed price term or
even an offer to sell.

As discussed further below, at the preliminary injunction
hearing Data Race announced to the Court that it intended
to pursue a theory of “corrective advertising” damages at
the trial on the merits, but it conceded that Data Race had
not undertaken any such advertising nor did it produce any
evidence of Lucent’s advertising expenditures relating to
Virtual Telephone that might illustrate how such damages
might relate to Data Race’s harm. Additional evidence of
corrective advertising damages have not been presented to
the Court in response to summary judgment.

With respect to “traditional” patent infringement damages,
and as discussed further below, Dr. Barker testified that
Data Race had no evidence that any losses incurred by Data
Race in connection with Be There! were attributable to
Lucent and that he could not identify any customer who
refused to buy Be There! because of Lucent’s Virtual
Telephone. Dr. Barker West Page 723 testified that Data
Race encouraged the public and its own customers to try out
Virtual Telephone because of its confidence that Be There!
was a superior product. Even if the Court were to consider
the declaration of Walter Bratic, submitted in opposition
to summary judgment, in reference to this element of the
test for a preliminary injunction, plaintiff has not met
its burden.

In sum, Data Race has produced insufficient evidence of
damages or harm.

Balance of Hardships

Regarding this factor, the Court must balance the harm to
the patent owner that will result from the denial of the
preliminary injunction with the harm to the alleged
infringer that will result if the injunction is
entered.[fn178] Plaintiff argues that the “negligible” cost
to be incurred by Lucent if the preliminary injunction
issues is outweighed by the harm to Data Race if the
preliminary injunction does not issue.[fn179] The Court
cannot agree. Even assuming, arguendo, that Data Race has
demonstrated a reasonable likelihood that Virtual Telephone
is infringing, Data Race’s inability to identify any lost
sale of Be There! or any quantifiable detriment to any
customer relationship suffered by Data Race due to Lucent’s
development of Virtual Telephone is key. Dat Race’s showing
on harm must be balanced against the harm caused to Lucent
by an injunction which would prevent if from continuing to
test, perfect and bring to the competitive marketplace a
product which, based upon the record in this case, is not
infringing.

Therefore, the Court concludes that Data Race has not met
its burden of showing that the threatened injury it would
suffer if injunctive relief did not issue outweighs the
damage granting the injunction would cause to defendant.

Tolerable Effect on the Public Interest

Regarding this factor, the focus typically is on whether
there exists some critical public interest that would be
harmed by the grant of an injunction.[fn180] Plaintiff
argues that the public interest is served by protecting
patents. The Court does not quarrel with this black letter
statement of law and public policy. Data Race has not shown
that denying the injunction will disserve the public
interest in the facts and circumstances of this case. The
public generally benefits from aggressive competition in
the market place among non-infringing products.

E. Plaintiff Has Not Established a Genuine Issue Regarding
Damages

Lucent has moved for summary judgment on plaintiffs claim
for damages as a result of Lucent’s alleged infringement of
the ‘639 patent arguing that there are no disputed issues
of material fact with respect to damages.[fn181] In
response, plaintiff argues that it is seeking both
traditional compensatory damages and damages under a
“corrective advertising” theory and that both aspects of
their damages claim should be submitted to a jury for final
resolution.[fn182]

Section 284 makes compensatory damages in an amount not
less than a reasonable royalty available as a remedy for
infringement.[fn183] Traditionally, compensatory damages
are proven by evidence of actual lost profits or an
established or reasonable royalty.[fn184] Data Race bears
the burden of proving damages by a preponderance of the
evidence.

Prior to a discussion of whether plaintiff has sustained
its summary judgment burden, “she Court once again
addresses plaintiffs changing positions on damages and
West Page 724 the adequacy of the opportunity afforded
plaintiff to conduct damages-related discovery. On May 14,
1999 defendant filed an advisory with the Court notifying
the Court that Data Race was not at that time pursuing any
relief other than injunctive relief.[fn185] The advisory
specifically indicated that Data Race “currently does not
seek recovery or have any evidence of economic or monetary
damages; and, although a claim for damages is pleaded in
plaintiffs first amended original complaint for patent
infringement, plaintiff seeks only permanent injunctive
relief in this action.”[fn186] At no time did Data Race
contest that advisory. In reliance on the advisory,
defendant did not pursue damages-related discovery from
plaintiff.

At the August 30, 1999 preliminary injunction hearing, Data
Race announced that it intended to pursue a damages remedy
and confirmed that it had served on defendant a second set
of interrogatories regarding damages on Friday, August 27,
1999.[fn187] Data Race acknowledged, in sum, that it had no
evidence of lost profits or “traditional damages” but
argued that the Court should allow plaintiff to prove
compensatory damages under a “corrective advertising”
theory or model.

The immediate significance of Data Race’s assertion of a
claim for damages during the preliminary injunction hearing
related to Lucent’s request that the preliminary injunction
hearing be consolidated with a trial on the merits. Date
Race opposed the motion, arguing that it had a right to a
jury trial on its request for damages. The Court denied the
motion to consolidate, holding that Data Race had a Seventh
Amendment right to a trial by jury on its claim for
damages. The Court also declined to extend discovery in
order to give Data Race additional time to collect evidence
of damages.[fn188] Although Data Race filed its original
complaint, request for injunctive relief and request for
expedited discovery in August 1998, Data Race apparently
undertook no discovery focused on damages until Friday,
August 27, 1999 when plaintiff served its second set of
interrogatories. The answers to the interrogatory requests
were not due until well after the expiration of the August
31, 1999 discovery deadline.[fn189] The parties did not
agree to conduct discovery after the expiration of the
discovery deadline. Lucent proffered that the damages and
accounting information plaintiff sought was voluminous. Had
the Court allowed opposed discovery after the cut-off date,
fairness would have required a reciprocal extension for
defendant to pursue defensive discovery on damages, an
action which, in turn, would have compelled a further
continuance in the filing of dispositive motions and,
likely, the trial. Data Race has not established a proper
predicate to justify such actions.

Data Race explains that it decided to revive its claim for
damages when it learned of Lucent’s decision to shift the
Virtual Telephone application from the ITS-E platform to
the MMCX server and of Lucent’s plan to make Virtual
Telephone “generally available” in mid-August, 1999.
Plaintiff contends that it did not learn of these decisions
until it took a deposition of one of Lucent’s
representatives on July 22, 1999 and, thereafter, plaintiff
decided to renew its motion for preliminary injunction and
decided to pursue damages.

Although it is well past summer 1999, there is no evidence
that Lucent has made MMCX release 3.0 “generally
available.” West Page 725 Moreover and more fundamentally,
Data Race has not countered the facts which demonstrate
that it knew in 1998 that Lucent intended to release an
MMCX-based Virtual Telephone in the summer of 1999. Vidil’s
affidavit, filed in connection with the initial preliminary
injunction motion, stated that Lucent reserved the right to
release Virtual Telephone in the future but at that time
did not plan to release Virtual Telephone on the ITS-E
platform.[fn190] Vidil was deposed in November 1988 and
testified that Lucent was considering moving Virtual
Telephone to the MMCX platform and releasing that
MMCX-based version of Virtual Telephone in the summer of
1999.[fn191] Data Race requested documents relating to the
MMCX-based Virtual Telephone as early as March 8, 1999 and
again on May 6, 1999 and those documents, timely produced,
showed a projected release date in the summer of
1999.[fn192]

Thus, Data Race’s contention that it was not aware until
July 22, 1999 of the shift of Virtual Telephone from ITS-E
to MMCX platform and the decision to release MMCX release
3.0 with the Virtual Telephone application in the summer of
1999 is not supported by the record. Data Race had notice
of Lucent’s intentions as early as November 1998. Data Race
had ample time available to pursue timely discovery of
damages, if not in November 1998, or in March 1999,
certainly in June 1999 when documents regarding MMCX
version 3.0 were produced in response to the May 5, 1999
discovery request.[fn193] Even if plaintiff had pursued the
discovery upon the completion of the July 22, 1999
deposition, the sought-after discovery could have been
completed within the existing discovery deadline. Data
Race, as plaintiff, may elect to pursue a damage remedy in
connection with its claim for infringement. But, plaintiff,
as any other civil litigant, must do so within time
parameters established by the Court.[fn194]

As noted, at the preliminary injunction hearing, Data Race
conceded that it had no evidence of “traditional”
damages.[fn195] Data Race asserted that instead of
traditional damages, it would pursue damages under a
“corrective advertising theory.”[fn196] Within trademark
law, corrective advertising has been ordered both as an
aspect of injunctive relief (infringer ordered to conduct
corrective advertising)[fn197] and as an aspect of
compensatory damages (infringed party compensated for past
or West Page 726 prospective corrective
advertising).[fn198] With respect to corrective advertising
as a component of compensatory damages, Data Race has not
shown that Data Race itself has engaged in any corrective
advertising to counter Lucent’s actions for which a damage
award would be appropriate. Thus, there is no allegation or
evidence that a corrective damage award would compensate
plaintiff for any past corrective advertising expenses.
Data Race has spent no money itself in sponsoring
“corrective advertising” to counteract Lucent’s “beta”
tests. Therefore, there is no genuine issue t)f material
fact regarding damages incurred by Data Race for its own
corrective advertising expenditures.

Plaintiff also argues that it may obtain corrective
advertising compensatory damages based on plaintiff showing
how much Lucent spent in developing and beta testing
Virtual Telephone on both the ITS-E and MMCX 3.0
platforms.[fn199] Plaintiff argues it would use this
information to fashion an objective basis for a claim for
corrective advertising damages based on the FTC
percentage-based model.

In response to defendant’s motion for summary judgment on
damages, plaintiff submitted no summary judgment evidence
to provide an objective foundation for corrective
advertising damages. Other than announcements on Lucent’s
web site regarding the development of the Virtual Telephone
application[fn200] and, later, its shift to the MMCX
platform and plans to release the product in the future,
Data Race has proffered no evidence of “advertising” by
Lucent.[fn201] Evidence that Lucent announced its
“breakthrough product”[fn202] is not proof of actual
advertising expenses incurred by Lucent to promote an
infringing product. Even assuming that any of the beta
tests of a version of Virtual Telephone are an infringing
use or an inducement of an infringing use such that Data
Race may be entitled to damages,[fn203] Data Race has not
discharged its summary judgment burden of creating a
genuine issue of material fact regarding the amount of such
damages. Summary judgment does not focus on the sufficiency
of a claim but whether the fact-finder must resolve genuine
issues of material fact. Data Race has produced no evidence
of corrective advertising damages. The Court may still
consider corrective damages as a component of injunctive
relief at the conclusion of the case.

In post-hearing briefing, plaintiff argues that “Data Race
has sufficient evidence of damages to overcome Lucent’s
motion for summary judgment,”[fn204] asserting —
contrary to its earlier representations — that it
intends to pursue a claim for “traditional” compensatory
damages, that is, lost profits and/or a reasonable royalty
for Lucent’s use of Virtual Telephone. In support,
plaintiff tenders a declaration from its proposed expert,
Walter Bratic, in opposition to Lucent’s motion for summary
judgment on damages.

Even if the Court were to consider Mr. Bratic’s proposed
declaration, it clearly does not meet plaintiffs summary
judgment burden with respect to lost profits West Page
727 damages. In order to recover lost profits, Data Race
must show that but for the infringement, it would have made
the infringer’s sales.[fn205] Bratic recites that “[a]t
this time, I have not determined if there are any lost
sales suffered by Data Race as a result of Lucent’s
introduction of its Virtual Telephone application on the
MMCX 3.0 product” and that he has “not yet determined if
lost profits is the appropriate measure of damages.”[fn206]
In sum, Data Race has not offered any evidentiary support
for its revived lost profits theory.

Bratic’s declaration also addresses the reasonable royalty
component of compensatory damages. Bratic states that he
has determined that a reasonable royalty of 1.5% of “net
sales of the MMCX 3.0” would be a reasonable royalty for an
award of $428 for each of three of the beta test sites for
a total of $1,284.00 in damages.[fn207] Bratic’s
declaration concedes that Lucent has not sold the Virtual
Telephone application for the MMCX release 3.0, and,
therefore, the royalty is only based on an estimated sales
price for installation of Virtual Telephone. Further, Data
Race has offered no evidence on the software provided to
the beta test customers, the configuration of the product
involved in the beta tests, how the beta tests were
conducted or whether or not the customers even used the
beta product.[fn208] Without proof of the product involved
in the beta tests and its use, the Court cannot make a
finding that the product being beta tested is infringing or
inducing infringement; therefore, no reasonable royalty for
use or inducing the use of the invention in connection with
the beta tests can be computed. There is no evidence that
the product being beta-tested would be the product Lucent
would offer for sale to the general public. Absent proof
about the beta tests, Data Race has insufficient evidence to
withstand summary judgment on “reasonable royalty” damages.

More fundamentally, as acknowledged by plaintiff in its
summary judgment briefing, the Court’s consideration of the
Bratic’s declaration is problematical. The deadline for the
designation of experts has long since expired.[fn209] The
discovery deadline has expired. The dispositive motion
deadline has expired. Yet plaintiff asks the Court to
consider a declaration from a proposed expert to defeat
summary judgment and, presumably, to allow that expert to
testify at trial. For the same reasons which support the
Court’s decision not to allow contested discovery after the
discovery deadline, Data Race has not demonstrated good
cause for the late designation of an expert on damages.
Because Data Race “could not offer [this] expert at trial,
[it] cannot use the expert witness’ affidavit to oppose
summary judgment.”[fn210] West Page 728

In sum, without evidence of damages, Data Race has no right
to present its theory of damages to a jury. The issues
remaining in this case concern plaintiffs request for
injunctive relief and matters raised by defendant’s
answer.[fn211] The Court may decide the remaining issues in
this case as a finder of fact pursuant to Fed.R.Civ. 65(a).
Moreover, irrespective of a right to trial by jury, the
Court may address any pending issue if the prerequisites
for summary judgment have been satisfied. In other words,
there is no right to jury trial on an issue when summary
judgment is properly granted on an issue.[fn212]

The Court is mindful that the fact-intensive nature of
certain issues militates against the precipitous grant of
summary judgment. Because the remedy can be drastic, its
application should be accompanied by careful consideration
for the entire record and the relevant law.[fn213] In this
case, plaintiff has failed to timely pursue evidence of
damages to entitle it to pursue a damages claim before a
jury. Plaintiff had a fair opportunity to fully develop the
record on all substantive issues in this case and plaintiff
has and will receive full consideration of its request for
injunctive relief on the merits of each of its claims. The
summary judgment on damages is narrow in scope and does
not, after the lengthy preliminary injunction hearing, mean
that the remaining issues in the case will be submitted on
a documentary record alone, as in the typical summary
judgment case. Even on damages, the preliminary injunction
hearing transcript supports a conclusion that in every
possible instance of eliciting testimony on damages,[fn214]
such testimony was obtained. That plaintiffs submission on
damages was focused on documentary evidence tendered to the
Court with its opposition to the motion for summary
judgment is attributable to plaintiffs decision not to
conduct discovery on damages in the ample time period
available for discovery.

F. Infringement Analysis

1. Literal Infringement

In order to establish literal infringement, a plaintiff
must demonstrate by a preponderance of the evidence that
every limitation in the properly construed claim “reads on”
the accused device, that is, whether the accused device
falls within the scope of the claimed invention.[fn215]
Because “[a] patent is infringed if a single claim is
infringed,”[fn216] the Court has individually West Page
729 examined each of the asserted claims to determine
whether they have been infringed by the accused device.
Plaintiff in this case has not met its burden. The Court
makes the following findings and conclusions in support of
its ruling that plaintiff has not established likelihood of
success on the merits of its claim of infringement, in
compliance with Fed.R.Civ.P. 52(c) and Fed.R.Civ.P.
65(a)(2), and with respect to defendant’s motion for
summary judgment on infringement.

a. Virtual Telephone Does Not Provide Virtual Presence

“Virtual presence,” as defined in the ‘639 patent,
requires, in sum, that the remote worker has the full
capabilities of the corporate office and transparency to
those dealing with the remote worker over the telephone or
the data network.[fn217] Virtual Telephone does not provide
either element.[fn218] Virtual Telephone does not provide
virtual presence as defined in the ‘639 patent.
Accordingly, summary judgment or, in the alternative,
judgment may be entered in favor of Lucent on this issue.

full capabilities of the PBX

Virtual Telephone does not extend basic office PBX
functions to the remote user, such as call transfer and
conference calling. If a remote user can transfer a call or
set up a conference call on the office telephone, these
features cannot be duplicated at the remote site using
Virtual Telephone.[fn219]

Virtual Telephone cannot provide the full capabilities of
the office PBX to the remote worker because the MMCX server
is connected to the PBX in a different way from the way in
which the VPS is connected as described in the ‘639 patent.
An office PBX has two types of connections: trunk
connections and extension connections. The office
telephones are plugged into the extension connections. The
trunk connections are used to connect the PBX to other
telephone networks, such as another PBX or the PSTN.[fn220]

Unlike the VPS described in the ‘639 patent, the MMCX
server is not attached as an extension on the PBX.[fn221]
Rather, the MMCX server connects to a trunk connection on
the PBX. As such, it cannot extend to the remote user the
basic calling features provided to a telephone attached as
an extension to the PBX, such as call transfer and
conference calling. In fact, the MMCX server cannot even
provide a dial tone from the PBX to the Virtual Telephone
client.[fn222] Thus, the client cannot use “DTMF signaling”
to remotely access features on the PBX.[fn223]

Dr. Weiss explained the difference between Lucent’s system
and the system described in the ‘639 patent as follows:
West Page 730

“[I]n the system represented by the patent, the [VPS] is
sitting on an actual extension of the PBX. And because
it’s sitting on an extension of the PBX, it has the
capability of all the features of the PBX. Any extension
on the PBX can do hold and call forward and conference and
park and all the other features that are available to any
other extension. So, as far as the PBX is concerned, the
VPS is just another extension, and . . . is capable of
accessing and using all the features that are available on
the PBX . . .

[T]he connection between the MMCX and the PBX is not an
extension but rather a trunk line. . . . Trunks are
usually connected from one PBX to another PBX. What’s
important is that the trunk line is capable of much fewer
control features of the PBX. For example, the trunk line
can’t do a hold, it can’t do a transfer, it can’t do a
conference. And so because of that connection, the MMCX is
not capable of exploiting the features of the PBX that an
extension would have. And because the MMCX can’t do it,
clearly then the telecommuter who’s working through MMCX
doesn’t have those features either. So, a telecommuter on
the virtual telephone system would have very few
telephone features and certainly couldn’t exploit the
full functionality of the PBX.”[fn224]

Plaintiff’s expert, Mr. Bradner, agreed that if Virtual
Telephone does not extend of all the features of the PBX
(including call transfer and conference calling), then it
cannot provide “virtual presence.”[fn225] Plaintiff’s
argument that Virtual Telephone provides “virtual presence
from at least the perspective of the remote users whose
office phones only have hold buttons”[fn226] must be
rejected. There are no facts in the record showing that any
PBX only provides a “hold” feature or that an office user
may be provided an office telephone that cannot access the
features of a PBX.

full capabilities of the LAN

Virtual Telephone does not extend the full capabilities of
the LAN to a remote user. Virtual Telephone is a voice-only
product. A client cannot run data applications (such as
e-mail) through Virtual Telephone. To access data
applications from a remote location, the user must bring up
a separate application on the personal computer screen that
has nothing to do with Virtual Telephone. The remote user
could access data applications (such as e-mail) by
connecting to the RAS without ever using the Virtual
Telephone application.[fn227] Thus, Virtual Telephone has
nothing to do with extending office data capabilities to
the remote user. As such, it does not provide “virtual
presence” regarding data to the remote user.

transparency to callers

Virtual Telephone does not operate transparently to a
person calling the remote user at the office. When a call
is placed to the office phone of a Virtual Telephone client
who is logged onto the MMCX server, the client’s office
phone will ring three or four times. The office PBX will
then transfer the call to the MMCX server. At that point,
the caller West Page 731 may hear an audible tone (a “ring
ping”). When the call is delivered to the MMCX server, the
caller may also hear an audible ring back.[fn228] In
addition, the display on the caller’s telephone may change
and indicate that the call is being forwarded to another
location.[fn229]

Thus, a caller receives a number of signals that inform the
caller that the Virtual Telephone client is not answering
his or her office telephone. Indeed, the office PBX
provides many of those signals to inform the caller that
the call is being transferred to another location. These
signals far exceed the display on the caller’s telephone
that, as discussed above, might also exist in implementation
of the ‘639 patent. A breach in the transparency of the
‘639 patent is caused when the caller — in a
circumstance not controlled by the claims of the patent
— has a display telephone. On the other hand, even if
a display telephone is not used by a caller to a Virtual
Telephone client, the outside caller will always receive a
number of signals that the call is being transferred
inherent to the operation of Virtual Telephone and, thus,
the transparency taught in the ‘639 patent will always be
breached in Virtual Telephone:

First, the call will ring three or four times at the remote
user’s office before it is sent to the MMCX server,
indicating that the called party is not in the
office.[fn230]

Second, the caller hears an audible tone — a
“ring-ping” — when the call is transferred to the
MMCX server that alerts the caller to the fact that the
call is being forwarded.[fn231]

Third, even when the PBX does not support a ring-ping,
there would still be an “audible ring-back” that would
alert the caller that the called party (i.e., the remote
user) was not at the corporate office telephone.[fn232]

The operation of Virtual Telephone was demonstrated to the
Court.[fn233] The demonstration showed that when a call
comes to the office telephone of a Virtual Telephone
client, the telephone rings three or four times before it
is forwarded to the MMCX server. At that point, there is a
noticeable audible change in the ring of the telephone. In
addition, the display on the caller’s telephone shows that
the call has been transferred to a new location.[fn234] The
ring pattern and audible changes are signals that the call
is transferred.[fn235]

Virtual Telephone does not operate transparently to a
person calling the reote West Page 732 user at the office
because the MMCX server operates in a different way from
the way in which the VPS operates as described in the ‘639
patent. With Virtual Telephone, the PBX must be
administered using call coverage to direct all calls to the
MMCX server when the office telephone is not answered. The
PBX must also be administered to send the call to the next
location in the coverage path (such as voicemail) if the
Virtual Telephone client is not logged into the MMCX
server. The PBX administration must be done manually at the
corporate office before the remote user can use the Virtual
Telephone application.[fn236]

The system described in the ‘639 patent uses remote call
forwarding to transfer calls from a remote user’s office
telephone to the VPS. When the remote user logs onto the
VPS, the VPS instructs the PBX to send all calls that are
intended for the remote user’s office telephone to an
extension connected to the VPS:

After validation in step 532, in step 534 the [VPS] 106
transfers a message to the corporate PBX 112 to [initiate]
remote call forwarding. The [VPS] 106 issues a command to
the PBX 112 regarding the virtual presence of the remote
user. It is noted that this command to the PBX 112 may be
issued automatically or manually. The command includes the
instruction to forward all telephone calls to the
extension of the remote user to the location of the remote
user at his “virtual office.”

If the PBX 112 supports remote call forwarding, the [VPS]
106 issues a sequence of tones, and hookflash if needed,
on the line to the PBX 112 that direct the PBX 112 to
forward the remote user s extension to the remote user’s
actual location.[fn237]

Thus, when a call is received by the PBX, it does not ring
at the remote user’s office phone, but is automatically
forwarded to the remote user through the VPS. As such, the
caller does not notice that the call is being sent to the
remote user at a different location.[fn238] That is what
makes it “transparent” to a caller that the remote worker is
not in the corporate office.

When the remote user disconnects from the VPS, the VPS
instructs the PBX to “unforward” the remote user’s office
phone: “In other words, the [VPS] 106 automatically sends a
message to the console to forward future messages back to
the user’s corporate office extension.”[fn239]

The VPS is able to use remote call forwarding and instruct
the PBX to forward calls to the remote user because, as
noted above, it is connected as an extension to the PBX.
When a telephone is attached as an extension to the PBX, it
can send a signal to the PBX to forward calls. As described
above, that is how the VPS is able to instruct the remote
user’s office telephone to forward calls to the remote user.
By contrast, because the MMCX server is attached to the PBX
through a trunk connection, it cannot send signals to the
PBX and instruct it using remote call forwarding nor, since
it is not connected to the PBX as an extension, could it
ask the PBX to forward calls to it, as the VPS does. With
the Virtual Telephone system, “the PBX must be manually
administered with call coverage before the Virtual
Telephone client ever logs onto the MMCX server to send
calls from the client’s office phone to the MMCX server.
Call coverage is not functionally the same as call
forwarding.[fn240] West Page 733

In sum, there is no genuine issue of material fact that the
full capability of the office PBX are not extended to the
remote worker using Virtual Telephone. Because Virtual
Telephone does not provide “virtual presence,” it does not
infringe the ‘639 patent.

B. Virtual Telephone Does Not Have THE Connections
Described In THE ‘639 Patent

As discussed, claim 1 of the ‘639 patent describes three
distinct connections: (1) a connection from the user
communications device at the remote site to the VPS at the
corporate office through the transmission media (such as
the PSTN); (2) a connection from the VPS to the telephony
server (such as the PBX); and (3) a separate connection from
the VPS to the LAN.[fn241]

Mr. Bradner agreed that the following figure accurately
represented the connections described in claim 1:[fn242]

[…]